1. NJ OFFICE OF THE STATE AUDITOR PLANNING FOR PERFORMANCE Stephen M. Eells State Auditor State Auditor

2. About The Office The State Auditor is a constitutional position appointed and confirmed by a joint session of the Legislature. The State Auditor is a constitutional position appointed and confirmed by a joint session of the Legislature. Office is administratively located within the Office of Legislative Services(OLS), a non-partisan office established to assist the Legislature in their mission. Office is administratively located within the Office of Legislative Services(OLS), a non-partisan office established to assist the Legislature in their mission. The office consists of approximately 92 professionals and six administrative staff. The office consists of approximately 92 professionals and six administrative staff. Reports are public and directed to the Governor, Senate President, Speaker of the Assembly and the Executive Director of OLS. Reports are public and directed to the Governor, Senate President, Speaker of the Assembly and the Executive Director of OLS.

3. About The Office(cont.) Established as the Legislative watch-dog over the other branches of Government. Established as the Legislative watch-dog over the other branches of Government. Critical to independence as compared to other audit organizations in the state. Critical to independence as compared to other audit organizations in the state. All of our reporting is in compliance with GAS (yellow book). All of our reporting is in compliance with GAS (yellow book).

4. Why We Are Different The State Auditor is a Constitutional Officer. The State Auditor is a Constitutional Officer. Established in a manner which allows for independence in both fact and appearance. Established in a manner which allows for independence in both fact and appearance. Primary focus is on auditing State Government operations of the Executive and Judicial branches of government. Primary focus is on auditing State Government operations of the Executive and Judicial branches of government.

5. How Are We Doing? During the last five calendar years ending December 31, 2015, we have identified $684.5 million in new cost savings or revenue enhancements. During the last five calendar years ending December 31, 2015, we have identified $684.5 million in new cost savings or revenue enhancements. This works out to approximately $1.5 million per auditor per year. This works out to approximately $1.5 million per auditor per year. During calendar year 2015, our audit of the Unclaimed Property Administration identified an opportunity for adding hundreds of millions of dollars in state revenue to the general fund through unfiled holder reports. During calendar year 2015, our audit of the Unclaimed Property Administration identified an opportunity for adding hundreds of millions of dollars in state revenue to the general fund through unfiled holder reports. In addition, we have noted a significant number of internal control improvements which have no doubt added to the efficiency and effectiveness of State operations which were not measurable in dollars. In addition, we have noted a significant number of internal control improvements which have no doubt added to the efficiency and effectiveness of State operations which were not measurable in dollars.

6. How Are We Doing?(cont.) Legislation requires us to perform annual compliance reviews of recently published audit reports. Legislation requires us to perform annual compliance reviews of recently published audit reports. In December of each year we perform compliance work on audits which were published in the preceding fiscal year. In December of each year we perform compliance work on audits which were published in the preceding fiscal year. We also update our work from the previous fiscal year which was reported upon in last year’s compliance report for the first time. We also update our work from the previous fiscal year which was reported upon in last year’s compliance report for the first time.

7. How Are We Doing?(cont.) Fiscal Year 2015 compliance review found that 79% of our recommendations presented in our audit reports had been complied with or were in the process of compliance. Fiscal Year 2015 compliance review found that 79% of our recommendations presented in our audit reports had been complied with or were in the process of compliance. Over the two-year period (Fiscal Year 2014), compliance with our recommendations had risen to 82%. Over the two-year period (Fiscal Year 2014), compliance with our recommendations had risen to 82%.

8. Types of Audits Performed We are authorized to conduct post-audits of all transactions and accounts kept by or for all agencies of State Government. We are authorized to conduct post-audits of all transactions and accounts kept by or for all agencies of State Government. We are authorized to conduct performance audits of any program or entity that receives state funds (follow GAS standards). We are authorized to conduct performance audits of any program or entity that receives state funds (follow GAS standards). We are authorized to perform forensic audits of any school district which has a year-end general fund deficit and one of several reporting criteria indicated in the enabling legislation. We are authorized to perform forensic audits of any school district which has a year-end general fund deficit and one of several reporting criteria indicated in the enabling legislation.

9. Types of Audits Performed (cont.) We perform: We perform: Financial statement opinion audits Financial statement opinion audits Performance Audits Performance Audits Internal control effectiveness Internal control effectiveness Program effectiveness, economy, and efficiency Program effectiveness, economy, and efficiency Program compliance Program compliance Forensic audits of school districts Forensic audits of school districts

10. AUDIT SELECTION Critical to the success of our mission, goals and objectives. Critical to the success of our mission, goals and objectives. Audit Planning Process Audit Planning Process How do we select our audits? How do we select our audits? How are scopes and objectives determined? How are scopes and objectives determined?

11. AUDIT SELECTION We use a “Committee” approach to establish and organize our Audit Plan. We use a “Committee” approach to establish and organize our Audit Plan. Planning is performed on an annual basis. Planning is performed on an annual basis. Calendar year design. Calendar year design. Committee formally begins work in September/October. Committee formally begins work in September/October. Plan is completed in December for use starting in January. Plan is completed in December for use starting in January. It is in a constant state of change from the minute it is published. It is in a constant state of change from the minute it is published.

12. AUDIT SELECTION Selection is “Risk-Based” Selection is “Risk-Based” Historical Analysis Historical Analysis What have previous audits encountered? What have previous audits encountered? Management stability? Management stability? New Legislation/New Programs New Legislation/New Programs Proper controls established? Proper controls established? New levels of management or experienced? New levels of management or experienced? Program Dollars Program Dollars The greater the program dollars, the higher probability it will be on our radar. The greater the program dollars, the higher probability it will be on our radar. We are constantly at Human Services and Education because of this. We are constantly at Human Services and Education because of this. Auditor Experience/Networking Auditor Experience/Networking Manager/Auditor-in-Charge suggestions. Manager/Auditor-in-Charge suggestions. National State Auditor’s Association National State Auditor’s Association

13. AUDIT SELECTION Selection is “Risk-Based”(cont.) Selection is “Risk-Based”(cont.) Legislative Requirements Legislative Requirements Legislation also allows for us to have discretion based upon available resources. Legislation also allows for us to have discretion based upon available resources. Legislative Requests Legislative Requests Legislative Services Commission Legislative Services Commission Legislative Leadership Legislative Leadership Strongly vetted for any political concerns. Strongly vetted for any political concerns. Agency Requests Agency Requests

14. AUDIT SELECTION Back to the Planning Committee: Back to the Planning Committee: They meet to build an inventory from all the sources for the calendar year. They meet to build an inventory from all the sources for the calendar year. They will initially assign the planned audits to each of our 9 managers. They will initially assign the planned audits to each of our 9 managers. Generally they are assigned by the manager’s state-wide area of expertise. Generally they are assigned by the manager’s state-wide area of expertise. Manager’s are all assigned to be liaisons with every state department. Manager’s are all assigned to be liaisons with every state department. The Committee Chair/Vice Chair will discuss each assignment with the Manager with regards to general scope questions. The Committee Chair/Vice Chair will discuss each assignment with the Manager with regards to general scope questions.

15. AUDIT SELECTION Planning Committee(cont.) Planning Committee(cont.) Once there is agreement on the assignments, staffing is completed. Once there is agreement on the assignments, staffing is completed. Staffing based upon experience and if possible, logistics. Staffing based upon experience and if possible, logistics. Final review and approval is given by the Assistant State Auditor in charge of operations. Final review and approval is given by the Assistant State Auditor in charge of operations. Plan is shared with the following: Plan is shared with the following: Legislature Legislature Partisan Staff Executive Directors Partisan Staff Executive Directors Executive Director of OLS Executive Director of OLS Governor, State Treasurer, State Comptroller Governor, State Treasurer, State Comptroller Departmental Liaisons upon request Departmental Liaisons upon request Purposely not a wide distribution because of it’s constantly changing nature and broad range of scope at the onset of an audit. Purposely not a wide distribution because of it’s constantly changing nature and broad range of scope at the onset of an audit.

16. QUESTIONS???? Contact Info: Contact Info: Stephen M. Eells Stephen M. Eells New Jersey State Auditor, Office of the State Auditor, Office of Legislative Services New Jersey State Auditor, Office of the State Auditor, Office of Legislative Services 609-847-3470 609-847-3470 seells@njleg.org seells@njleg.org